Tax Advice: Mitigating inheritance tax

Spouse exemptions on inheritance and gifts – tax saving tips.

Inheritance tax is a tax on the estate (the property, money and possessions) of someone who has passed away.

You can leave everything on death to your spouse or civil partner, and no inheritance tax will be payable. Any unused threshold can also be added to your partner’s threshold when you pass away. This means their inheritance tax allowance can be double the amount when they eventually pass away.

You can also pay less inheritance tax by giving away gifts throughout your lifetime. ‘Exempted gifts’, small gifts you make out of your normal income, such as birthday presents, are not usually subject to inheritance tax.

There’s also no inheritance tax to pay on gifts between spouses or civil partners. You can give them as much as you like during your lifetime, as long as they live in the UK permanently. Other gifts do however count towards the value of your estate.

In most cases, seven years needs to pass before a gift is considered outside your estate for tax purposes, but there are exceptions. These include gifts out of your income, wedding or civil ceremony gifts of up to £1,000 per person, payments to help with another person’s living costs, such as an elderly relative or a child under 18, and gifts to charities and political parties.

You can give as many gifts of up to £250 per person as you want during the tax year as long as you haven’t used another exemption on the same person.

With specialist advice, forethought and sensible tax planning inheritance tax can be mitigated. Our Beavis Morgan tax experts are available to guide you and advise on the available strategies.

For more information on this topic or to discuss how we can help you effectively structure your finances for tax and save you money, contact your usual Beavis Morgan Partner.